Every open enrollment, someone in HR gets asked a version of the same question: should I take the extra life insurance here, or buy my own? Often it arrives phrased as term versus whole life, because that is the framing the employee has read somewhere.
It is a fair question. It is also not one an employer should answer. This page covers what the employee is usually actually asking, the difference in plain terms, where the line sits for HR, and what an employer can legitimately do to help — which turns out to be quite a lot.
What the Employee Is Actually Asking
Very few people who raise term versus whole life are genuinely weighing policy structures. Underneath, the question is almost always one of three:
“Is what I have through work enough?” The most common one, and the most answerable. It depends on their obligations, not on policy type.
“What happens to this if I leave?” A question about your plan specifically, which you can and should answer precisely.
“Someone told me whole life is a bad deal — is it?” A question about a product category, asked of a person with no licence to answer it.
Separating the three matters, because the first two are yours to answer and the third is not.
The Difference, in Plain Terms
Term life covers a set period — ten, twenty, thirty years. If death occurs during the term, it pays. If the term ends first, coverage ends and nothing is returned. It has no cash value, and it buys the most coverage per dollar of any structure.
Permanent life — whole life, universal life and their variants — is designed to last for life provided it stays funded, and accumulates a cash value the policyholder can borrow against or surrender. It costs materially more per dollar of death benefit, because it is doing more than one job.
Neither is the better product. They answer different questions: term covers a period of obligation, permanent covers a permanent need or serves a purpose beyond the death benefit. Which of those a given person has is a question about that person, not about insurance.
Your Group Plan Is Term — and That Has Consequences
Group life is term coverage, priced on the group rather than the individual and tied to employment. Three consequences follow, and all three are things an employer can state plainly without straying into advice.
It ends when employment ends. Not at some later date, and not with a grace period anyone should rely on. The certificate says exactly when.
Conversion usually exists, briefly. Most group certificates let a departing employee convert to an individual permanent policy without medical questions, inside a short window — often 31 days. The premium is individual whole life at attained age, so it is expensive. For someone who has become uninsurable, it can be the only door still open.
Portability is better where it exists. Some plans let a leaver keep term coverage at group-adjacent rates. It is cheaper than conversion and less commonly offered.
This is the part employees most need and least often hear, because the notice tends to go out with the COBRA paperwork and gets read as part of it. A conversion right nobody is told about is not a conversion right.
Where HR Should Stop
Recommending a particular product to a particular employee is insurance advice, and giving it requires a licence. An HR manager who says “honestly, just buy term and invest the difference” has given a specific recommendation to someone who may act on it, and who may be worse off for it.
The risk is not theoretical, and it is not really a legal risk in most cases — it is a relationship one. An employee who follows well-meant guidance from their employer and later finds it was wrong for their situation does not blame the product.
The workable line is simple: explain the plan, not the purchase. Everything about what your plan covers, costs, and does at termination is yours to explain in as much detail as you like. What someone should buy personally is not.
What an Employer Can Legitimately Do
Stopping short of advice leaves more room than employers assume.
State the coverage precisely. How much basic life exists, whether it is a flat amount or a salary multiple, and what the supplemental increments cost at the employee’s age.
Flag the guaranteed issue window. This is the one genuinely time-sensitive fact in the whole conversation. Up to the guaranteed issue amount, an employee can elect supplemental coverage at initial eligibility with no medical questions. Skip it now and electing later usually means underwriting, which they may not pass. An employee who understands only this has been well served.
Give people a personalized statement. A number on a page beats a policy summary. People who can see their own coverage amount ask better questions.
Run a beneficiary review every year. The carrier pays the name on the form, not the person the employee would obviously have chosen, and not whoever is named in a will. This is the single most damaging failure in group life and the cheapest to prevent.
Bring in someone licensed for the individual questions. An enrollment session where a licensed person takes one-to-one questions moves the conversation to someone qualified to have it, and takes the pressure off HR. That is a normal part of how we support a group plan.
Questions We Get
An employee asked whether to buy term or whole life. What should we say?
Explain the plan, not the purchase. You can say exactly how much coverage they have, what supplemental costs at their age, what the guaranteed issue amount is, and what happens to the coverage if they leave. What they should buy personally is a licensed conversation, and pointing them to one is the helpful answer rather than a deflection.
What is the actual difference between term and whole life?
Term covers a set period and pays only if death occurs within it, with no cash value and the most coverage per dollar. Permanent insurance — whole life, universal life and variants — is built to last for life while funded and accumulates a cash value, at a materially higher cost per dollar of death benefit. They answer different questions rather than ranking against each other.
Is our group life term or whole life?
Group life is term coverage. It is priced on the group rather than the individual, and it ends when employment ends. That is why conversion and portability provisions exist, and why they matter more than most employees realise.
Can HR get in trouble for giving advice?
Recommending a specific product to a specific employee is insurance advice and requires a licence. In practice the bigger exposure is relational rather than legal: an employee who acts on well-meant guidance from their employer and is later worse off does not blame the product. Explaining your own plan carries none of that risk.
What is guaranteed issue and why does it matter at enrollment?
It is the amount of supplemental coverage an employee can elect at initial eligibility without answering medical questions. Above it, or later on, the carrier requires evidence of insurability and can decline. It is the one genuinely time-sensitive fact in this conversation, and an employee who understands only that has been well served.
What happens to an employee’s life insurance when they leave?
It ends with employment. Most certificates allow conversion to an individual permanent policy without medical questions inside a short window, often 31 days, at individual rates. Some plans also offer portability, which keeps term coverage at better rates. Both have hard deadlines and both are routinely missed because the notice arrives with COBRA paperwork.
How much group life should we offer?
One to two times salary is the common range for employer-paid basic coverage, often with a flat-dollar alternative for hourly populations, and supplemental coverage lets employees who need more buy it. The more useful framing is what you intend the benefit to do — cover final expenses or replace income for a period — since those imply very different amounts.
Should we bring someone in at open enrollment?
It is usually worth it where supplemental life is offered. A licensed person taking one-to-one questions moves individual coverage decisions to someone qualified to handle them, improves supplemental take-up because employees get real answers, and removes the pressure on HR to answer questions they should not.
Why do employees think whole life is a bad deal?
It is a common piece of internet advice, and like most general advice it is right for some people and wrong for others. The comparison usually assumes a buyer whose need is temporary, which describes many people and not all of them. It is not a question an employer should adjudicate either way.
What is the most useful thing we can do about life insurance this year?
Run a beneficiary review at open enrollment. The carrier pays the name on the form regardless of marriages, divorces, births or deaths since it was signed, and it does not defer to a will. It costs nothing, takes one reminder, and prevents the worst outcome this benefit can produce.
General information for Michigan employers, not legal, tax or individual insurance advice. We are licensed insurance brokers, not financial advisors, and an employee’s personal coverage decision belongs with a licensed professional who can look at their whole situation.
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